KTRS

Foiled in state court, a Jefferson County Public Schools teacher filed a federal court suit Monday claiming the Kentucky Teachers’ Retirement System illegally raised teachers’ share of pension contributions to shore up a retirement plan that is only half-funded.

Randolph “Randy” Wieck, a history teacher at DuPont Manual High School, launched the legal battle last November by filing suit in Jefferson County Circuit Court. The case was dismissed with a recommendation that it be refiled in Franklin County, he said.

Instead, Wieck filed the lawsuit in U.S. District Court in Louisville. As before, Wieck is asking that the roughly 141,000 teachers and school system retirees in Kentucky be allowed to participate in the suit. He is joined in the suit by Manual English teacher Betsey Bell and retired Manual librarian and English teacher Jane Norman.

Kentucky’s active and retired teachers are apprehensive about the solvency of their state-funded retirement. As of its last audited annual financial report on June 30, 2014, KTRS was only 53.6 percent funded with $16.2 billion in assets and $30.2 billion in obligations. A bill calling for the sale of $3.3 billion in bonds, which would have raised the KTRS funding level to 66 percent, failed in the 2015 legislative session.

Six state lawmakers are being tasked with finding solutions to Kentucky’s under-funded retirement system for public school teachers.

Legislators debated a plan in this year’s General Assembly session that would have borrowed more than $3 billion in bonds to shore up KTRS.

State Senator Joe Bowen of Owensboro was among Republicans who objected to taking on more debt.

"Our opinion was that it was a huge risk to do this and if things didn't work out we stood the chance of jeopardizing the plan even further," Bowen said.

Senator Bowen is one of the appointees of the committee that will offer new recommendations to the governor by December 1. The panel will have its first meeting on Friday.

Bowen told WKU Public Radio that new money must be found to invest into KTRS and structural changes are required that will likely affect new hires.

"They're going to be looking at a new retirement plan," stated Bowen. "We not talking about going from a defined benefit to a defined contribution. That's never been part of the conversation, but what we are saying is that new hires will probably have to work longer."

Bowen says the KTRS work group will also have to address pension spiking and cost of living adjustments in order to bring a long-term impact to the pension system.

KTRS, which covers about 120,000 active and retired members, has an unfunded liability of $14 billion.

Analysts say Kentucky will need to hire more state employees or have them pay more into the retirement system in order to reverse the state’s pension crisis, painting a grim portrait of Kentucky’s main public pension system.

Ryan Sullivan says the state will not be able to “invest its way out” of the pension crisis.

“The unfunded liability will actually increase for the first couple of years until salaries can grow fast enough to where this payment grows larger and actually starts to pay down this unfunded liability," Sullivan said.

State Sen. Joe Bowen, a Republican from Owensboro, says that there aren’t many solutions to the crisis.

“There’s obviously only two ways we can do that: employ a bunch more people or require our current employees to pay more,” Bowen said.

In order to remain financially solvent, the state’s annual contribution will have to increase from $560 million in 2015 to $1.4 billion in 2034.

In 2013, lawmakers passed pension reforms which moved new state workers onto 401(k)-style plans and tweaked the tax code to generate more money for the system.

But pension officials say the system still needs more money.

The state has hired another firm to conduct an actuarial audit of Kentucky Retirement Systems.

The head of Kentucky’s Chamber of Commerce says he’s not giving up hopes that lawmakers will fix the state’s troubled pension systems.

Dave Adkisson says his group was disappointed that the recent General Assembly failed to pass both a $3.3 billion dollar bond issue to support the pension fund for teachers, and a bill mandating an independent study of that program.

Adkisson says legislators must eventually act in order to protect not only pensioners, but also the state’s bond rating.

“If Western Kentucky University is building a new building, if you’re building a new city hall, a new courthouse, a new highway, a new dormitory—those things can cost more because the bonds are lower-rates, and the interest rates are higher.”

The teacher’s pension system only has 53-percent of the money it needs to make future payouts to about 141,000 retired teachers. Earlier this year, KTRS officials said if bonds weren’t issued, the state’s required contributions to the system would double by 2026.

Adkisson, a former mayor of Owensboro, also said Tuesday that he hopes the state’s next governor will stick with changes made to Kentucky’s academic standards.

With two working days to go, Kentucky lawmakers still haven’t nailed down legislation to address the state’s growing heroin problem and it’s ailing teachers pension system.

On Friday, legislators from both chambers met for hours, trying to craft compromises on the bills.

A solution is starting to take shape to help shore up the teachers pension system, but the House and Senate remain divided on sentencing guidelines in the heroin bill.

Lawmakers have until 11:59 p.m. Tuesday to pass laws.

Heroin

Representatives and senators were still at odds Friday afternoon over needle exchanges, sentencing guidelines for heroin traffickers, and whether to include a “good Samaritan” clause that would provide immunity to those who report heroin overdoses.

Senate President Robert Stivers repeatedly suggested that the committee stop arguing and produce a bill that only includes points that lawmakers agree on: making overdose-reversing drug naloxone more available and increasing funding for treatment programs.

House Speaker Greg Stumbo’s $3.3 billion bonding bailout of the Kentucky Teachers Retirement System won’t pass this session, but a smaller study-and-finance package may still be in the works.

The retirement system only has 53 percent of the money it needs to make future payouts to more than 140,000 retired and active teachers in the state. The state’s required contributions to the system will double by 2026, according to KTRS officials.

On Tuesday, the Senate rejected $3.3 billion in bonding for the retirement system proposed by the House, replacing it with language that would require a committee of lawmakers and experts to identify problems in the pension system and come up with a report on possible solutions by December.

Now a conference committee comprised of representatives and senators will try to come up with a compromise to the two proposals.

Stumbo, a Democrat from Prestonsburg said the legislature was in a similar situation in 2013 when lawmakers addressed the cousin of the teacher retirement system—the Kentucky Retirement Systems.

“The Senate kind of wanted reforms but it didn’t want to address the pending issue of financial stability and money,” Stumbo said. “We want to make sure that the fund is financially sound, and we’re willing to listen to some of their suggestions on reforms if they’re willing to do something on the financial stability side.”

In that 2013 session, the legislature required the state to make recommended contributions to the KRS, created a separate pension fund for new hires and limited their benefits. The reforms have been considered successful by some, however KRS still only has 21 percent of the money it needs to make future payouts.

Stumbo said bonding should be included in a solution this year because interest rates are favorable. KTRS officials said the state can borrow money at a 4 percent interest rate and a 7 percent return from its investments in the system.

Senate President Robert Stivers, a Manchester Republican, hasn’t said if he would consider bonding in a final bill. But he said he’s willing to compromise.

A proposal to bail out Kentucky’s ailing teachers’ retirement fund with a $3.3 billion bond issue is dead in the General Assembly.

Senate President Robert Stivers stripped the bonding provision from the bill Tuesday, saying that more time is needed to study and fix the Kentucky Teacher Retirement System before more money is added. “There are systemic changes that need to be made in KTRS before we can make it actuarially sound and viable in perpetuity.”

Now the bill would set up a committee of lawmakers and hire an independent think tank to study KTRS’ predicament and potential solutions. The teacher’s pension system only has 53 percent of the money it needs to make future payouts to about 141,000 retired teachers.

Also unlikely to pass this session are the local option sales tax bill and a measure to allow more public/private partnerships.

And a bill that would require students to use the bathroom designated for the sex they were born with is a non-starter in the Democratic-controlled House. House Speaker Greg Stumbo says the measure hasn’t gained support in his chamber.

The Kentucky House of Representatives has approved the largest loan in state history to help rescue the troubled teacher's retirement system.

The Kentucky Teachers' Retirement System pays $144 million in benefits every month but only has a little more than half the money it needs to continue making those payments. House lawmakers approved a $3.3 billion loan on Monday that would take advantage of historically low interest rates to help keep the system afloat by lowering the state's required annual contribution.

But the bill faces long odds in the Republican-controlled Senate, where lawmakers say they are worried about borrowing money to pay off a debt. Republican Senate President Robert Stivers argued the state should make wise investments with the pension fund's assets to stop the system from deteriorating.

Louisville educators who support a lawsuit seeking to recoup lost money from Kentucky's underfunded teachers' pension system clashed this week with the head of the Jefferson County teachers' union.

The Kentucky Teachers' Retirement System serves about 145,000 teachers across the state and is underfunded by about $14 billion, largely because the state legislature hasn't in recent years provided the necessary contributions to keep it solvent. New state pension accounting standards to be enacted starting this year will compound that $14 billion liability, raising it to about $22 billion.

The issue was at the center of a panel discussion Monday in Louisville that included Jefferson County Teachers Association President Brent McKim and Chris Tobe, a state pension expert and former Kentucky Retirement Systems board member.

If the legislature fails to take action, the pensions could enter a "death spiral" where it may not be able to make sufficient investments or meet its obligations to pensioners, Tobe and McKim said.

New pension accounting standards could place Kentucky's teachers' retirement system among the worst-funded in the U.S.

The new standard from the Governmental Accounting Standards Board, set to go into effect this year, will take a more holistic approach to government pension accounting. As a result, the state will be required to provide a more accurate accounting of its various pensions' liabilities.

As a result, the new standards will place the funding ratio of the KTRS pension to about 40-percent funded, said Chris Tobe, a Democratic candidate for state treasurer and former Kentucky Retirement Systems board member.

The current unfunded liability of the Kentucky Teachers Retirement System stands at 51.9 percent, which works out to about $14 billion in unfunded retirement moneys. Under the new federal standards, that liability will increase to about $22 billion, said KTRS legal counsel Beau Barnes.

The $20 billion budget passed by Kentucky lawmakers underfunds teachers’ pensions, giving the system hundreds of millions of dollars less than requested to keep it afloat.

Public school teachers in Kentucky don’t get Social Security benefits. They can’t even claim their spouses’ either. So that makes their pensions all the more important.

But the already tight-as-a-snare-drum budget passed by lawmakers continues to underfund the Kentucky Teachers Retirement System by about half the amount they need to bring the system -- which is currently about $13 billion short -- into the black.

Beau Barnes is general counsel for the KTRS. He says that changes in federal accounting laws will only compound the problem.

“The sooner the funding issue can be addressed, the better, because the longer it takes, the more difficult it’s going to be to address because the funding status will continue to decline,” said Barnes. “The GASB accounting measure of unfunded liability would have the pension fund running out of money in about 2036.”

Barnes says he’s optimistic the situation won’t come to that, and is looking forward to working with the governor and the legislature to address a problem to which, so far, they’ve given little more than lip service.

Chris Tobe's interview with WKU Public Radio about the harsh reality facing Kentucky's pension programs

Chris Tobe is a man who is currently playing the role of “bearer of bad news.”

He worked as a trustee with the Kentucky Retirement Systems from 2008 to 2012, where he got an up-close-and-personal look at how the state’s pension systems were being underfunded. Tobe is also the author of the book Kentucky Fried Pensions, and he makes presentations around the state detailing the crisis facing the commonwealth’s pension programs.

While Gov. Steve Beshear and state lawmakers from both parties have hailed pension reform efforts passed in 2013, Tobe says it’s a drop in the bucket compared to what is needed to fix the underfunding issue.

Compared to the rest of the nation, Tobe believes “Kentucky is probably second worst to Illinois” when it comes to the health of its public pension programs.